Investors get back into silver after silver price drops

The Silver price has fallen almost ten percent in the second half of this month, which is once again attracting bargain hunters. On Wednesday, when the precious metal's price fell for the seventh trading day in a row, Added investors added 2.93 million troy ounces of silver to their position in the iShares Silver Trust. That was the largest one-day inflow of precious metal since October last year. The iShares Silver Trust is the largest silver ETF in the world, better known to investors by its acronym SLV.

Until recently, silver was the best-performing commodity in the Bloomberg Commodity Index, a basket of 22 different commodities. In mid-April, almost €560 was paid for a kilo of silver, more than 15% higher than the price at the beginning of this year. After that, the prices of gold and silver started to fall again, which is largely due to the results of the French presidential elections. On Friday morning, the silver price stood at just over €510 per kilogram, the lowest level in seven weeks.

Emmanuel Macron emerged as the most popular candidate last Sunday, beating the eurosceptic Marine Le Pen, pushing worries about a possible 'Frexit' into the background. Investors breathed a sigh of relief and shifted their wealth from precious metals to the stock market and the bond market.

Bargain hunters get into silver

 Last Tuesday , it was announced that Chinese silver imports had increased by 42% in March compared to a year ago. This figure, combined with the lower silver price, gave investors the motivation to expand their position in the precious metal again this week. ETF trader Dave Lutz of JonesTrading Institutional Services gave the following statement to Bloomberg.

Maybe someone is hedging their short position in the expectation that the silver price will rise again and this party is doing so through a silver ETF. There are many factors worldwide that can cause people to get into precious metals and silver can take a ride up.

A further decline in the price of silver is not excluded, but at the same time there are plenty of reasons to be positive about the precious metal. Standard Chartered analyst Suki Cooper wrote in a recently published report that silver mine production had fallen last year for the first time in 2004. For this year, Cooper expects another drop in production, which means less silver will enter the market. Without an increase in the price of silver, she says , there is only limited room for the mines to start new profitable projects.

Silver as a safe haven 

Savers and investors see silver as a safe haven in uncertain times, as the precious metal is a tangible asset with no counterparty risk. Investors who buy silver expect the price of the precious metal to rise sharply in a monetary crisis.

Silver, like gold, has a history as a monetary metal, but today the former is mainly used for industrial applications. As a result, the price of the metal also reacts to changes in the economic cycle.